Apple Considering To Shift More iPhone Production To Taiwan
As the number of casualties and infections from the Wuhan coronavirus start to rise, concerns about the virus's impact on the tech industry's supply chain have also started to become the norm. One particular company, Cupertino tech giant Apple Inc (NASDAQ:AAPL), which has the bulk of its assembly-supply-chain based in China has seen several analysts raise apprehensions regarding the coronavirus's ability to disrupt operations.
Now, Taiwanese publication DigiTimes is reporting that Apple is shifting some of its iPhone production to the island nation as the coronavirus makes it hard to determine risks associated with Foxconn's production in China.
Apple Might Shift Production For Upcoming iPhones To Taiwan As Coronavirus Continues To Complicate Working Environment
As per the details from the paywalled report, Apple is considering to shift more production of its iPhones set for launch in the first half of this year to Taiwan. The consideration comes on the back of Apple's need to diversify the risks associated with continuing production in China, reports the publication.
Naturally, since DigiTimes provides few details with the report, we're bound to speculate ourselves for the reasons behind this move. Apple's deliberation to shift production to Taiwan for a device that is slated for launch in H1 does not speak much about the company's confidence in its production resources in China being able to recuperate in time for a product launch.
At this point it's important to remember that Apple has one of the best supply chains in the world, owing to the volume of iPhones that the company must ship each year. Additionally, given the company's extreme dependence on revenue from the iPhone, it is bound to have worked contingencies in its production and operations management to deal with emergencies such as the coronavirus.
It's estimated that one week of production delays costs Apple approximately one million of iPhones produced. The extent to which the company's decision to shift more iPhone production to China will change this estimate, but since the shift does not relate to the company's flagship models due in the second half of this year, do not expect the equation to change significantly. Local authorities' decision to allow Foxconn to continue production in its Zhengzhou facility spelled good news for the contract manufacturer, but as of now, it remains unclear when Foxconn will be able to bring back production in China back to optimal levels.
Alongside reporting about Apple's decision to move production to Taiwan, DigiTimes also has snippets of information about global smartphone shipments. The publication believes that these shipments are all but set to fall sharply even if the Chinese manage to contain coronavirus before H1 2020 is over.
Research firm TrendForce believes that global smartphone production for the first quarter of this year ending in March will decrease by 12% year-over-year to 275 million units produced. This will mark a new five year low for the smartphone industry and the firm also believes that since Apple has instructed the bulk of its workforce to work from home due to virus-related concerns, the company is finding it difficult to certify components for the 2020 iPhone lineup.
Data from Canalys has suggested that shipments in the quarter will drop by 50% year-over-year, in a rather alarmist figure. IDC believes that disruption from the coronavirus will also affect the smartphone industry in the long and medium-term as delays continue to be passed on forward in time.
Earnings guidance from San Diego chip giant Qualcomm also reflects a drop in chip shipments for the coming months. Qualcomm's estimates are generally an industry-standard owing to its strong partnerships with a host of smartphone manufacturers.